Luxury, Price and Brand Narrative

If you ask somebody in emerging luxury market the following questions.:

• What is  Rolex?

• What is  Louis Vuitton?

• What is Chanel?

• What is Hermes? 

• What is Goyard?

The answers fetched are likely to be different but many would be able to connect these with the brand’s most prototypical product category. One common running theme is likely to center around price or expensiveness. High price and luxury have gone together forever and it is what sits at the core idea of luxury. Semantically, it is opposite to ‘necessary’.  Necessaries are indispensable as these are essential for survival. Luxury has been associated with excess, abundance and opulence. One of the examples of ‘excess’ as the defining aspect of luxury is a watch.  Brands like Breguet make ultra-complicated watches by adding features which push designing and manufacturing to breach the limits of possibility and confer the status of luxury on the product.  Luxury can be viewed from several angles: 

Price: Most probably it is going to be  high price, very expensive, exorbitant, beyond reach. High price is the most overt sign of luxury brands.  The price is a relative indicator and it positions the product towards the top end of the spectrum. Consequent upon the high price two things happen. This superior position links them to high perceived quality. Quality is often  difficult to decipher especially by non-experts. So, price becomes a powerful surrogate for quality. Often, price itself serves as a signifier of a nebulous amalgam of physical reality and invisible undefinable. For instance, Patek Philippe Nautilus costs about 150000 dollars. 

Aspiration and expression:  The people on top of the social hierarchy become aspirational because of emulation in consumption practices. Luxury in this realm operates as visible markers for emulators who seek connections through consumption parity with people on higher pecking order. The essence of this aspect of luxury was articulated by Veblen as conspicuous consumption where brands are used as status markers. Luxury  is evocative of a lifestyle, typically associated with the elite. Luxury brands enable the aspirants to achieve parity with higher classes through commonality of consumption. Through this practice the customers gain a feeling of elevation by being able to buy products related with higher classes. Mercedes cars sport bigger and bolder three-pointed star on their hood to cater to this market.  A bag with big ‘LV’ sign is commissioned by the owner to shout out loud. This ,however, is not done by Birkin which does the same but silently. 

Uniqueness: The high price of luxury may stem from objective reasons traceable to unique ingredients or processes (rare fur or skin or metal or intricate craft). Louis Vuitton uses Vachetta leather known for

high quality or Rolls Royce is hand crafted machine or intricate Argyle pattern introduced by Pringle. The high price that draws from objective considerations adds differentiating dimension or  uncommonness pushing the product into the realm of uniqueness. Every Hermes bag is the outcome of ‘painstaking work of the craftsman’ where leather is still  pieced together by saddle stitch. 

Self-esteem: This uniqueness operates to serve luxury buyer in two ways: first as a device of signaling system of differentiation to the external world and second, as something of self reward or adding sheen to self-concept. A Rolex is not just a time keeping device or ‘certified chronometer’ but a symbol of achievement. The brand is credited for remarkable achievements in the domain of horology including waterproof and dust proof watch (Oyster), date display (Datejust) and Helium escape valve (Sea- Dweller).  Mercedes is credited with innovation including multi-valve engine, four- wheel suspension and ABS and many more. 

Spirit: A painstakingly crafted porcelain or intricately woven fabric or fine piece of jewel carries an invisible but perceptible aura of the maker. The intimate bond between the creator and created embeds the soul of craftsperson. Therefore, many luxury pieces are called ‘one of its kind’. The creation liberates itself from the narrow confines of utility into the realm of  art. It is artistic authentic expression of the spirit into physical form. Many luxury brands imprint their unique spirit or soul on to whatever products they carry. 

In a world of mass production and spread of prosperity, markets have been democratizing consumption. The descending economic entitlement is both boon and bane for the luxury marketers. The pursuit of ‘more’ is likely to negate the very essence of luxury. And luxury bought simply because of high price is unlikely to touch customer at deeper level without which it may tantamount to shallow or superficial consumption. Luxury without an appropriate brand narrative (its myth and mystique) is devoid of psycho-socio-cultural meaning rendering luxury consumption hollow. Suppose you can afford an expensive watch (not too expensive) which one would you buy?

Would it be a Rolex, Omega or Tag Heuer? 

Depends upon whether you choose to buy a time keeping instrument or a narrative that runs below visibility of assembled components.

Nano, Premiumization, Repositioning, and Big Cat Is Not Cat It Is Tiger, Stupid

Nano was launched with great fanfare in March 2009. But before its launch, Nano became talk of motor world in almost all corners of the world. Nano cut into news channels and newspapers for something that was considered undoable in automobiles.  Cars or four wheelers were finely segmented in to different clusters on price-performance curve.  Lower performance came at lower price; compare Maruti 800 sitting at the base and BMW or Audi at the center and high performance sports cars on the top like Ferrari or Porsche.  The important point in Nano’s case was it challenged the point at which so called car value curve originated.  Implying for a vehicle to qualify as a car it must have some minimum engine capacity and thus minimum price. This was set by then prevalent  automobile engineering, manufacturing and marketing paradigm. 

Breaking a paradigm is often called ‘out of box’ or innovative thinking. It is critical challenge for many companies to break away from their low performance levels by rule breaking. Therefore innovation is a cherished idea in corporate circles. It is something like questioning ‘why the apple must fall on earth’ again and again. An out of idea when translated into a product and process may win accolades with the technical community of researchers and engineers but fail to ring with market.  For instance a refrigerator with see through door was rejected but designers saw great utility in its ability to convey stock levels of various things without having to open the door. Sony’s Betamx and Apple’s Newton are some other examples.

In a market typically products are clustered along price-performance dimensions. And this clustering is determined both technical or engineering constraints and customer expectations.  Consider bikes or cars or tractors or computers. The engine capacity and price if plotted on a two dimension diagram would reveal distinct clustering (bikes like 100cc, 150cc, 350 cc). A product created out of altering these combinations comes with both opportunities and risks. My best way to exemplify this is to imagine a cat making company in its attempt to expand market goes on to increase its size and it keeps increasing it. What happens beyond a point (on price-performance/power axis) it ceases to be a cat and becomes tiger. And if you decrease its size, again beyond the minimum psychological limit of cat category again it ceases to be cat. Product categorization is purely is a mental scheme by which mind creates ordering and classification to make the external reality manageable.

Each of categories of a product is usually tied up some consumer motives. For instance high power bikes (like Harley, BMW, Hayabusa) tied with dominance and ‘against’ identity. A car per se is a visible or item of conspicuous consumption. It conveys who you are (identity expression, existing psycho-socal group) and it assumes instrumentality in belongingness role (desired psycho-social group). In a consumption society which works on the construction-‘ you are what you  have’ – possessions both give self and social identities. How much would be the desire in people at the bottom tier of market (non car customers) to belong to car buying category (psycho-social group in terms of power and status). They certainly would like to buy a car for its psycho- social significance. They would like to  ‘unbelong’ or ‘disassociate’ from their present group to gain assertiveness and power (in new society the old sources of identity have diminished in their role).  Now consider how Nano fits in this scheme of things.

 

A car which is publicized for being the cheapest car is likely to a contender for accolades in academia and technical circles. This publicity simultaneously invests meaning in the car which renders is irrelevant for the target customers. The vehicle becomes an open display of one’s non-car buyer status. It marginalizes and pushed the owner the car to the bottom of the road power politics. Nano may be an excellent solution to driving in city conditions, but the publicity and hype that made it hog limelight extraordinaire became its own cross.

So what is the solution? Nano needs to break complete away from its price centric perception. Give potential buyers a reason to buy the cheapest car wrapped up in a motive other than price. It can become for instance, choice of smart pro planet people or ‘I am me’ group who buy cheapest car not for price’s sake but for ‘that’s how they are’.  Nano’s new campaign aimed to reposition it, ‘you re awesome’ trivializes the brand. A car is serious product category and people seek seriousness first before emotions of fun. Now BMW is pure joy and thrill to ride but much before this position it established itself as the ‘ultimate driving machine’. 

Luxury, Merc A Class, and Class & Mass Dichotomy

A recent news item in The Economic Times began with words, ‘Mercedes Benz launched its ‘A Class’ luxury hatchback in India…to competitive luxury car market.  The new Merc A Class is a compact car priced between Rs 21.93 lakh and Rs 22.73 lakh. The car is meant to target the affluent youth.  Mercedes Benz expects to sell about 100-150 units of A Class in a month.

Luxury is a complex phenomenon. Luxury brands create and command value disproportionate to good or service (embedded functionality) that they sell. In this regard high price is both an indicator and ingredient of luxury brands. This means luxury and low price are mutually exclusive. The exclusiveness and prestige on the socio-psychological plane is to a great extent is created by a price meant to exclude majority. Therefore exclusion by creating barriers to reach (un-affordability) and access (distribution) are crucial aspects of luxury brand building. Luxury brands thrive on the paradigmatic opposition between ‘class’ and ‘mass’; ‘function’ and ‘aesthetic’ and ‘form and content’. This dichotomy is essential to luxury brand building. Luxury branding is about adding layers meaning in disguise aimed to make an impact without saying anything. The purveyors of luxury therefore refrain from using verbal communication. They talk through a language comprised of symbols and signs.

The paradigmatic opposition between luxury and non-luxury stems from certain codes that set them apart: conspicuous value, uniqueness, hedonistic pleasure and quality. (1) The conspicuousness or visibility value originates from a brand’s ability to signal status wealth associated with a class (Veblen’s conspicuous consumption).  Luxury brands act as class markers.  For instance the one who drives a Rolls Royce belongs to top layer of economic hierarchy. (2) Scarcity and rarity of something endows it with uniqueness accordingly especially commissioned to master makers of jewelry, watches and carpets. This fits with human desire for uniqueness. (3) Luxury brands serve human needs to experience a certain affective states. The pleasure/ joy of indulgence in a luxury brand derived from tradition, heritage and authenticity. The sheer feel and joy of sporting a Cartier necklace or a Tiffany ring is unparalleled. Finally, quality and workmanship is essential building block for luxury brands. It is a sine qua non. Both Mercedes and BMW have lot to their credit in perfecting quality of automobile. BMW for a long period of time positioned their brand as the ‘ultimate driving machine’. This campaign has now been taken to a higher level and BMW now promises its owners an unmatched ‘joy’ / ‘pleasure’ (hedonic benefit) of driving.

The launch of Merc A class at a price point which puts the brand within the reach of a larger set of potential customers makes perfect sense considering the share objectives.  But many non-luxury companies like Hyundai and Toyota have cars which are priced higher than entry level Mercedes. This intersecting point presents an interesting dilemma for a potential car buyer. The purchase motivation beyond a certain price band is governed predominantly by symbolic considerations. The buyer ‘cross over’ so achieved by this strategy is likely certainly likely to expand the brand ownership. But fundamental question that needs to be addressed the psychographic fit of this customer segment with the target segment. 

• Luxury is a two way street.  Brands develop their sign value from cultural resource located in the form of prestige groups within a society.  The highly selective brand owner group and its lifestyle feed back into the symbolism of luxury brands.  A large part of its symbolism is based on ‘how a brand is used’ (how a car is driven by a new money and old money) – which represents intangible core of the brands. It is this intangible core which holds a lure for luxury buying customers who seek non-material cultural transformation. Mercedes A Class prima facie violates many luxury codes. The lure of market share is genuine but it can potentially be a mirage.